George Jagodzinski (00:00):

Today, we learn about intentional integrity, how not to stray from that integrity, and how to avoid complacency. I'm joined by the guy that wrote the book on Intentional integrity, Rob Chesnut. Rob's had a very interesting career. Amongst many other things, he started prosecuting spies, he led trust and safety for eBay, and he was the general counsel and chief ethics officer at Airbnb. He shares some amazing stories and insight. Please, welcome Rob.

(00:24):

Welcome to Evolving Industry, a no-BS podcast about business leaders who are successfully weaving technology into their company's DNA to forge a better path forward. If you're looking to make actual progress rather than spinning around in a tornado of buzzwords, you're in the right place. I'm your host, George Jagodzinski.

(00:53):

Hey, Rob. Thanks so much for being here.

Robert Chesnut (01:03):

Hi, George. Thanks for having me.

George Jagodzinski (01:05):

Today, we're going to talk integrity. This is near and dear to my heart because one of our core values is do the right thing no matter who's looking. And you've been talking about a scary topic, which is what happens when everyone's looking all the time. What does happen, then?

Robert Chesnut (01:23):

Well, that's a good point. It doesn't seem like there are any secrets anymore with the internet.

(01:28):

In the old days, I think people were afraid to complain. And now, if something is going on inside of a company that doesn't resonate with the values of all the employees, the employees, they'll blog about it, they'll be on Slack talking about it, they'll print out internal documents and go to Congress.

(01:50):

As leaders, you've got to understand that the world's changed, and leadership today is about more than just the bottom line. The bottom line is really important, but you've also got to navigate a pretty tricky set of circumstances when it comes to integrity because, look, we could probably all agree about lying, cheating, and stealing being wrong, but there's also a lot of disagreement about exactly what integrity is, what it means. It can be gray. In many cases, I think it depends on your background, your culture, your life experience, your religion. There could be disagreement about it, and that can be a tough path for a leader to navigate.

George Jagodzinski (02:28):

Yeah, and here we are in the spring of 2024, and Boeing's all over the headlines. And that's such a great example of how do you find that balance between what your corporate goals are and then really living out integrity, even if you have the best of intentions.

Robert Chesnut (02:46):

There's something interesting. I thought about companies like Boeing and some other ones. I like to talk about this concept of the number on the wall. A lot of times, companies or leaders will think that leadership is about putting out an audacious goal and then just browbeating everybody to hit that number or hit that goal. I think leadership's about a lot more than that. And in fact, while I love numbers and I love goals, they can take you down a really bad path. I'll give you a couple of examples.

(03:20):

At Airbnb, my first month, the number on the wall was 200 million nights. Everybody in the company was lined up around our goal of hitting 200 million nights for the year. And you go to the company meeting, and 200 million is the first slide, and everybody's talking about how we're going to get there. I thought, "Wow, that's a great goal, audacious, but certainly, what could be wrong with that?"

(03:46):

And then I started noticing that we had some hosts on the site that were getting bad reviews. On a five-star scale, they might be a two and three-star reviews. The Airbnbs weren't clean. They weren't doing a good job of greeting guests. Maybe the pictures were misleading.

(04:04):

So I went to the team that was responsible for dealing with hosts like this. I said, "Hey, what's going on? Why is this host on the site and this one? They're really providing a bad experience to our guests, and this is the sort of thing that can kill the business." I'll never forget it. The guy looked at me and said, "Well, Rob, you're right. The problem is we've got to hit 200 million nights, and even a bad night is still a night."

George Jagodzinski (04:30):

Wow.

Robert Chesnut (04:30):

When everyone gets all organized and enthused by hitting a number, sometimes that number becomes a substitute for doing the right thing, and it can lead you down that path. Like Boeing, for example. You got to hit a deadline to get the plane out.

(04:46):

Or Wells Fargo. The Wells Fargo scandal happened because the leadership of the company learned that customers who had lots of accounts with the bank were their most profitable. So, if you've got a checking account, a savings account, a mortgage, and a credit card, for example, then you're very valuable to the bank. In fact, the most valuable customers to the bank had eight separate accounts.

(05:14):

So the CEO decides that they're going to do a campaign; Eight is Great. And they started putting up, Eight is Great everywhere around the company. And the sales team started to get really pushed to increase the number of accounts per customer. In fact, the sales team was told one day, "If you don't hit your targets, you'll be working at McDonald's next month."

(05:37):

So what happens? Well, they hit the target all right, and the way they hit the target was they started opening up accounts for customers when the customers didn't even ask for it and didn't even want it. They hit their account number until the customer started complaining, and it all came really crashing down and ended up costing the bank a fortune in fines and regulatory inquiries, and it hurt their brand.

(06:05):

So numbers are great, but numbers can also lead you down a bad path if they're in isolation and no leader is actually talking about doing the right thing and operating with integrity.

George Jagodzinski (06:18):

It's interesting, what I've seen, and we've done this. I've seen my clients do this. When you start seeing the number driving the wrong behavior, I find that the initial reaction is, "Oh, let's add more numbers to it." So it's like, "We need more accounts, and we need them happy. What's that number? How do we measure if they're happy? Oh, we need them happy, and we need them to stay with us longer. So how do we measure that?" Is that the right answer; adding more numbers?

Robert Chesnut (06:44):

Again, I love numbers. I was a federal prosecutor back in the old days. But when I first got into business, I thought that businesses counted what they did. What I learned was that businesses do what they count.

(07:02):

So when you deal with people who are very competitive in the business world, you put a number out there and start counting, and everybody's going to want to make the number better. You got to make it bigger, you got to make it faster. That's what often drives behavior. And that's okay as long as you've given thought to the number, and you understand that it can be a powerful incentive, and you blend it with talking about the importance of operating with integrity, doing the right thing, and following the law.

George Jagodzinski (07:33):

That makes a lot of sense. What I've seen where it works is if the numbers are in concert with an extremely strong culture, so it's not just that mandate of integrity, but then within the culture where people won't blame each other, where people will actually have the long view of what they're doing, that that's where it seems to be successful and people don't stray too far from the values.

(07:59):

Evolving Industry is brought to you by Intevity. We bring order to chaos wherever people, process, and technology converge. Our culture drives our solutions, and we are solutions-obsessed. We see every challenge as an opportunity, every partner as a collaborator, and every project as a chance to share our values and commitment to excellence. Give us a shout. We'd love to hear your challenges and turn them into opportunities. Find out more at intevity.com.

(08:22):

Now, back to the show.

(08:27):

I'm curious here, what lessons have you seen out there as far as how you take integrity, not just from this bright-eyed idea on words, and bring it all the way down to the trenches?

Robert Chesnut (08:36):

Right. Well, one way to do it, I think, is make sure that you know why your company exists. What's the North Star? Too often, I'll ask that question, and a leader of a company will say, "Well, we exist to make money." I think that's the wrong answer. I think that's actually going to lead you down a bad path. A company needs a mission. It needs something that will inspire its employees and inspire its customers, and one that will actually be a guide and a North Star when making a difficult decision. And that has got to be more important ultimately than a short-term financial goal. I'll give you an example.

(09:21):

At Airbnb, we noticed that there were issues online around discrimination, that users of color were complaining that hosts were turning them down when they asked to stay at a place. And at first, I think we thought, "Well, that couldn't really be true. There wouldn't be that kind of discrimination." But the complaints got louder. There was a #AirbnbWhileBlack. Regulatory agencies, the California Department of Fair Employment and Housing, filed a class action suit.

(09:57):

As the general counsel, I went off and did the lawyer thing. Is Airbnb legally responsible if some of its hosts are discriminating, even if the discrimination is unconscious bias? What about the fact that we ban discrimination in our terms of service? We don't allow it. Does that protect us? Do these discrimination laws apply to short-term rentals in people's homes?

(10:23):

So I go off and do all my legal research, and I go sit down with Brian Chesky, the Founder and CEO of Airbnb, and I start going through the law with him. Brian holds up his hand and says, "Rob, stop. I don't care." I said, "Whoa, wait a minute, Brian. What do you mean you don't care?" And Brian looked at me and said, "Rob, Airbnb's mission is to get people out from behind their computer, visiting places in the world that they've never been before, and actually traveling in a way where they're meeting people who are local and people that maybe are different than they are." He said, "That's the purpose of the company. If this sort of thing is really happening on our platform, Rob, we're failing as a company, and I don't care what the numbers say." So he said, "We've got to fix this." He said, "So you go deal with the law, but this is something we have to do because it is core to who we are and why we exist."

(11:21):

The company then went on, I think, a real mission to attack the problem. They devoted a lot of resources to it. It cost a lot of money. They brought in outside help from people who had fought discrimination in other contexts before. One thing we did, for example, is we required all of our users agree to a statement that said that they wouldn't discriminate. And there was a button down at the bottom. It was one that said, I agree, I disagree. I remember we asked Brian, "Well, Brian, what happens if somebody disagrees when they're shown the pledge?" And Brian said, "Well, they're gone." "Gone?" He said, "Yeah, they're off the platform."

(11:56):

I remember we lost a little over 1% of our users in about a two-week stretch. There were some obviously short-term financial implications, but in the long run, the respect that we gained from employees, from users, from regulators it really, I think, supported the brand, made the brand even stronger. And I'm convinced that the company's even more financially successful today because they took a stand on something that was core to their mission.

(12:28):

I think you have to be thinking as a leader. Sometimes you've got to think long-term, and you've got to think about doing the right thing, particularly in today's environment, doing the right thing and believing that it will ultimately pay off for you. And I think it often does. There's a lot of data, George, that shows that companies that are ethical by a number of objective standards, they actually outperform their peers, and they outperform the stock market.

(12:55):

So it's not as if there's a choice, like either I'm going to be ethical, or I'm going to make money. I think, in reality, what happens is being ethical and doing the right thing ultimately means you're going to be more financially successful.

George Jagodzinski (13:11):

I love that there's objective measures out there because I think to do what you're talking about, it requires the bravery not to just look at the quarterly results, but look more long-term. And you need a board, and you need an executive team that's going to be brave enough to look at that long picture.

(13:24):

You know what I loved in both of the examples that you mentioned, Rob? One thing in common is that in each of them, there was no complacency. You were inspecting the business and what was going on, even though you're hitting the goals, and you're winning.

(13:38):

I'm a huge Formula One fan. Toto Wolff, the team principal for Mercedes, he has this idea in his culture that even when we're winning, we're always looking at every single detail to make sure that could we have been better. Could we be doing something different? And I think a lot of people think, "I don't want to break it if it's working," but just because you're hitting the numbers doesn't mean it's working. And so, constantly inspecting, it seems like really that's the right approach.

Robert Chesnut (14:02):

I think that's right. You need to constantly be thinking about doing better. And doing better doesn't always mean just a bottom-line number. I think it also means, am I true to my mission? Am I doing right by the very purpose for why we exist?

(14:20):

Again, at Airbnb, we would use what was called the stakeholder approach. A lot of companies think of themselves as having only one stakeholder, and that's their shareholders. If it's right for the shareholders, which often means is it right for the stock price this month, then we do it. Look, I think investors and shareholders are very important, and your share price is important. But if that becomes the yardstick and that is the only thing you're trying to do, you might hit the numbers in the short term, but I think over the long term, you're going to start to fail.

(14:56):

So what we would do is, we would say, "Well, we have shareholders who are a critical stakeholder, but our employees are important stakeholders, our guests, our hosts, and really any community that has Airbnb." So these are all individual stakeholders. And so, when we make a decision, we need to understand how it's going to affect each of those five stakeholders. Obviously, you're not always going to be able to make decisions that are good for all five stakeholders. If it were that easy, business would be super simple. Sometimes they're trade-offs. But if you're consistently doing things for the benefit of one group and ignoring the other stakeholders of your company, I think that's setting yourself up for long-term success.

George Jagodzinski (15:40):

That makes a lot of sense.

(15:41):

Now, shifting gears a little bit. One thing that is a little bit worrying is the trend of just more and more visibility. Let's say you have a great culture. Let's say you're really mission-focused, and you're doing the right thing, you're inspecting the business, but there's more and more visibility, never mind if you layer on AI, that people are going to be able to see if you're doing the wrong thing maybe before you even see if you're doing the wrong thing. I don't know if you saw this example of the ref that was booted, I think, halfway through a game for, I think, it was something on social media. But how do we all live in that type of a world with integrity where people are going to call you on things before you can call it on yourself?

Robert Chesnut (16:21):

Well, you've got to show foresight. You've got to anticipate a problem before it becomes a problem, really. I can give you a few examples.

(16:33):

At eBay, one of the things that I was responsible for at eBay was deciding what items you should sell online. What items could we sell on eBay? And the initial threshold we had was, is it legal? If it's legal, we'll sell it. If it's not legal, we won't. And that worked fine for a while until it came out that some people on our site were selling Nazi memorabilia. They were selling items, like World War II uniforms and the like, from Germany. One of our board members saw it, and he said, "You know, I'm not going to be part of any company that's profiting from the sale of Nazi memorabilia. So either that goes, or I go."

(17:16):

It was legal to sell it, but we started to understand that if it's got the eBay logo there in the frame, then it is actually reflecting on our brand. So we started exploring items of this sort. And one of the items that came to my attention one day was a wafer. Someone had gone to the Vatican, and they had gotten communion from the Pope, and they had gotten a wafer. And instead of eating the wafer, they took the wafer, put it in their pocket, went home, and put it on eBay. So the team came to me and said, "Well, Rob, do we allow the wafer?" I went. "Yeah. It's a wafer. The Pope gave it to them. Perfectly legal to sell. Let's do it."

(18:06):

Well, that turned out to be a mistake because two days later, I got a call from my CEO wanting to know why the Catholic Church had initiated a global boycott of eBay because it turned out that the Catholic Church viewed the wafer literally once consecrated like that as the body of Christ. It was highly sensitive.

(18:24):

So look, one thing I learned was I don't know everything. Everyone's got a different background, different culture, and if you want to make the right decision, you've got to listen to a diverse set of voices. And by listening to that diverse set of voices, you can avoid problems before they come up and become overwhelming.

(18:44):

So what we did in the aftermath of the wafer, was we set up a global team of people from different backgrounds and cultures that would look at these issues, and it really enabled us to make better decisions earlier to avoid those sorts of problems.

George Jagodzinski (19:00):

That makes a lot of sense. Yeah, I know it could be so easy to think that you know what the right thing is to do. The moral of the story is probably none of us know anything is the right thing to do. You need a collective.

Robert Chesnut (19:14):

Yeah. The older I get, the more I realize the limitations of my own knowledge. That's healthy because I think it's caused me to listen to people who are different than I am, and respect the fact that they may have a different perspective, they may have different values, and that's okay. We'll make better decisions if all of these voices are considered.

George Jagodzinski (19:37):

Makes all the sense in the world. And now, stepping one forward, now you layer in AI, and now you're listening to things that you don't even know what is true. I have an AI me that I can make it say whatever I want. It scares the heck out of my wife and my daughter. But in that world, how do we navigate? Does anything mean anything at that point?

Robert Chesnut (20:02):

AI is a little scary. I think we need to confront some of the ethical challenges that AI is bringing forward.

(20:11):

I was just in Miami at a conference, and the speaker after me was Pitbull. Pitbull was talking about AI and how someone showed him how someone online had made Pitbull songs. And Pitbull was like, "Fuck, that sounds just like me." Pitbull would even talk about the need for some... First of all, I think we need government and some rules to settle for us the unsettled. And right now, I think what you own is unsettled, and the fact that companies can basically hoover up your data and take your voice and your image and use it for their own purposes carries with it, I think, some interesting legal issues and some real dangers.

(21:00):

I think we also have to understand that AI relies on existing data. So, to the extent that the world is imperfect now and that bias exists and prejudice exists now, AI is just going to take that and supercharge it because it's relying on things... If, for example, you want to build a model that helps you cull through resumes and find potential employees that are most like your current best employees, sounds great, until you realize that your own workforce isn't diverse enough, that there has been discrimination, unintentional perhaps, in the past, and that a model like that is going to perpetuate the discrimination.

(21:45):

Lots of interesting issues and challenges around AI and lots of interesting potential as well.

George Jagodzinski (21:52):

Well, what that confirms for me, Rob, is what I assumed in my head, which is that any time there's a gathering of people in the Miami area, Pitbull is at every single one of them.

Robert Chesnut (22:00):

Pitbull's there. I was very surprised by the way. I didn't know much about Pitbull; humble, hardworking. The guy never graduated from high school. You meet him, and you get a real authentic sense of gratitude. I've spoke to a number of people in the community down there, has a great track record for giving back and helping others and being an active part of the entrepreneurship community there. It was a really good learning experience for me because I never would've guessed that Pitbull was such a positive force in the community down there.

George Jagodzinski (22:35):

That's fantastic.

(22:36):

So, back to what we were just talking about on the AI side. I am overall optimistic. Last time you and I were talking, you said something along the lines of we're trained, and we're used to learning from the things that we read, and we see, and that's going to have to change. My initial reaction was like, "Yeah, Rob, but I do look at that with the critical eye, but I think you are saying we're going to have to elevate to being smarter about things." And that's kind of inspiring to me for the future is that we're going to have to be smarter in some sense, right?

Robert Chesnut (23:07):

We're going to have to level up to keep up with AI, and I think we're going to have to learn to be a little more skeptical of anything that we read and anything that we see. I think all of us are kind of trained around this idea of seeing is believing. Well, particularly when it comes to things online, you can't necessarily believe everything that you see.

(23:29):

So we're either going to need technology to help us sort through truth and fact from fiction, or we're going to have to become a lot more skeptical ourselves and really train our mind a bit to be open-minded and understand that just because we see something online doesn't mean it's necessarily real.

George Jagodzinski (23:51):

And people in the legal field are excellent at that, so it makes all this sense in the world that was your roots.

(23:58):

And in doing so, organizations are going to have to be smart about that. Legal used to be a lot of times brought in at the end of a strategy. We figured out the strategy. Tell us where we need to button things up. And it seems like it's a lot more being a partner now.

(24:14):

One of my guests that I had on, Diana Haussling, she plays a CMO role at Colgate-Palmolive. She says legal is one of the first things. They're her friend. It's not someone that you need to worry about at the end. And I'm curious what your experience has been being more involved in the early stages of strategy.

Robert Chesnut (24:30):

Yeah. The worst setup is where the business comes up with the product and comes up with the solution, and then it's like, "Oh, well, we just need to get this stamp of approval from legal, and then it's a go." It works much better if legal's in the room, a thought partner. And by the way, it's on legal to get there. You earn a spot at the table. I know we are doing things right when the business wants legal at the meeting early on to help be a thought partner. You come up with better products that way. You also have a much better, more collaborative relationship with the business when things operate that way.

(25:14):

For example, at Airbnb, the lawyers would actually sit with the different business unit that they supported two or three days a week, simply because if you're there in person, you're the eyes and ears, you overhear things, you're having conversations, and you become a part of the team that builds the business. And ultimately, if you're an in-house lawyer, you're still a business person, and your goal is business success. You are just contributing through the lens of someone with legal training.

George Jagodzinski (25:46):

That's a great perspective. I love that.

(25:48):

We do a lot of workshops with our clients with strategy, and there's always this funny stage of that where we go through the guest list. It's reminiscent of doing a guest list for a wedding because it starts out, you just add everyone's name in there where you're like, "Well, if we invite this cousin, we have to invite these cousins," and we have to whittle it down because you can only have so many people in a workshop.

(26:08):

We've been asking more and more. We've got to have someone from legal in there. And to anyone listening here, if you're listening to Rob, I think having someone that represents legal in those strategy workshops... also, you should just do more workshops, they're fantastic, cross-functional... but have legal in there.

Robert Chesnut (26:23):

If you're thinking to yourself, "Well, I don't want the lawyers there because they're just going to say no, and they're going to try to stop us from doing things," I think you got the wrong lawyers. I think the business world needs lawyers that can say, "What if we do it this way?" Or, "There's some risk in that approach, but if we're trying to accomplish X, if we make this adjustment, we're going to actually end up in a much better place." You need a thought partner. You don't need someone who is more the guard at the gate.

George Jagodzinski (26:58):

I love your perspective.

(27:00):

Rob, you got such an interesting career. You originally were prosecuting, and specifically I think you were prosecuting spy cases, and then through to your corporate world. Are there some fundamental threads that were core to you with prosecution that you've carried through to your corporate life?

Robert Chesnut (27:20):

I think order. I like order. Maybe it's just the way my mind works, but I think society actually works best when there are some common sense rules that everyone follows. As a prosecutor, it was really about having rules that are necessary for society. And as a prosecutor, you're sort of at the end of the line to punish those who break it.

(27:48):

And when I got involved in the corporate world, I started at eBay. I was one of their very early employees, but my job was really the site rules. What can you sell? What sort of restrictions are we going to put on activities on the site and the like? But I think it's not rules just for the sake of rules. It's rules that actually help promote a community and success for everybody.

(28:17):

Again, at eBay, the goal is we need an order for things to function properly. Almost like you need traffic lights because with traffic lights, things are smoother and work better. And look, the same thing with Airbnb. As an in-house lawyer, making sure that there's a certain structure in place, I think helps drive business and drive society.

(28:45):

So, if I had to pick one word, I guess for a through line for 40 years as a lawyer now, I would say order.

George Jagodzinski (28:54):

You speak it straight to my heart, Rob. I have all of my spice drawers in alphabetical order, and it brings me peace in my life.

Robert Chesnut (29:01):

That's great.

George Jagodzinski (29:03):

Which brings me to my last question, which is I always like to ask throughout life, throughout your career, what's the best advice you've ever received?

Robert Chesnut (29:12):

You know what, I think it's actively engage with the world with curiosity. Opportunity doesn't actually come knocking at your door, I found. You've actually got to go out and find opportunity. And the more you have a hobby, you work with other people, you show up at things, the more good things happen to you.

(29:35):

I think engaging with curiosity, asking why, showing interest in other people, I think having that kind of energetic relationship with the rest of the world is enriching for your life. Hopefully, you're adding things to the lives of other people while you're doing it. And I think it opens up so much opportunity for you. I think, engage with the rest of the world, do it with a positive spirit and with curiosity.

George Jagodzinski (30:05):

Well said Rob, and thanks for being here. You allowed me to engage with my curiosity here, so thanks so much.

Robert Chesnut (30:11):

Well, thank you, George.

George Jagodzinski (30:14):

Thanks for listening to Evolving Industry. For more, subscribe and follow us on your favorite podcast platform. And, pretty please, drop us a review. We'd really appreciate it. If you're watching or listening on YouTube, hit that Subscribe button and smash the bell button for notifications.

(30:28):

If you know someone who's pushing the limits to evolve their business, reach out to the show at evolvingindustry@intevity.com, or reach out to me, George Jagodzinski, on LinkedIn. I love speaking with people getting the hard work done. The business environment's always changing, and you're either keeping up or going extinct.

(30:44):

We'll catch you next time, and until then, keep evolving.